There’s More to U.S. Investing than the NASDAQ and the Dow Jones

By: Keith Kaplan

Jun 24, 2021 | Investing Strategies

There’s another Cold War brewing.

Last week, I dove into the ongoing tech war brewing between the United States and China. What started under the Trump administration has snowballed under the Biden administration.

Right now, the financial press is hyper-focused on the Federal Reserve, meme stocks, and chatter about Prime Day.

But the story about how U.S. semiconductor companies might lose business in China isn’t front-and-center.

As I noted, Boston Consulting Group said that U.S. semiconductor companies could see their global market share plunge from 48% in 2018 to as little as 30%.

If that’s the case, someone would have to pick up the slack, right?

There are many semiconductor companies around the world. Public semiconductor companies in Japan, Germany, and South Korea all have ample global market share and generate billions of dollars in revenue each year.

But not every one of these companies trades on U.S. exchanges.

So, unless you have access to accounts that let you trade on foreign exchanges, you might think you cannot invest in them.

That’s not always the case.

Today, I want to show you how investors can tap into the profit streams of significant international companies, even if they aren’t listed on U.S. exchanges.

Take a Look at This List

Around the world, many brands have incredible market share in their respective industries. However, they are not listed here in the U.S.

I’m talking about Japanese video game and entertainment giant Nintendo.

Chinese internet and AI behemoth Tencent Holdings…

Iconic television manufacturer Panasonic…

And – the company that could surpass Tesla as the largest manufacturer of electric vehicles in 2023 – Volkswagen, according to company executives.

None of these companies trades on the New York Stock Exchange, NASDAQ, or other centralized exchange. Instead, they trade “Over-the-Counter” (OTC).

Some people don’t know what that means.

And others have an immediate bias when they hear the term.

The perception is that if a stock trades OTC, then there is more risk, or the companies might be shady. Well, it’s fair to be skeptical of a neighborhood.

But it’s not fair to have a bias against every resident. 

OTC simply means that an asset is traded through a broker-dealer network.

In this scenario, the broker-dealer buys and sells assets for its account on behalf of its customers.

This process is straightforward. OTC trading helps investors trade equities, derivatives, and other assets that would otherwise not be available to them depending on several different circumstances (mainly out of investors’ control).

For example, some stocks might not meet specific requirements to trade on an exchange. For example, a stock might trade under $1.00. In order to trade on the NYSE, a stock must be above that important threshold.

OTC stocks also have specific requirements to access certain equities.

Think of OTC stocks a little as you might think of a retail store. A broker needs to have an inventory of these assets for you to have access to them. For these reasons, brokers might require you to pay additional transaction fees or place certain restrictions one what stocks or other assets you can purchase.

There are also additional risks that investors should be aware of.

The biggest risk is that certain OTC stocks might not provide a lot of public information to investors. This is one of the reasons why OTC stocks get a bad reputation.

In addition, OTC stocks tend to have lower trading volumes and larger spreads between the bid and ask price.

However, it’s not challenging to mitigate these risks. Suppose you’re looking to invest in a large, multinational company that trades OTC in the United States.

In that case, you will be able to access the company’s public information through regulators in its home country. In addition, bigger companies that trade with high volumes on other global exchanges will likely have adequate volumes and tighter spreads in a tighter market.

Today, I want to show you a few examples of great companies that trade OTC and what we see from the market.

Let’s Look at Some Interesting OTC Stocks

TradeSmith Finance tracks OTC stocks the same way as it tracks anything listed on the New York Stock Exchange and the NASDAQ. Our platform can tell you the entry signal, smart moving average, and VQ score (to measure volatility.)

As I noted above, there are many semiconductor companies that could build market share if this brewing Cold War accelerates. It just so happens that one of the top 10 semiconductors in the world trades OTC and has a very compelling profile in TradeSmith Finance.

Infineon ADR (IFNNY) is Germany’s largest semiconductor manufacturer with a market capitalization of more than $50 billion. Founded in 1999, the company spun out from its previous parent company, Siemens AG. This is one of the 10 biggest semiconductor companies globally and, as of 2020, has more than doubled its revenue to more than 8.6 billion euros ($10.2 billion in today’s U.S. currency)over the last seven years. When the semiconductor industry is in flux, German companies like Infineon could capture any market share lost by U.S. companies in Asia due to the ongoing “Tech Cold War”’ that I’ve previously discussed. IFNNY stock is currently in the Green Zone and maintains uptrend momentum.

But don’t just focus on semiconductors if you’re looking for an opportunity that trades OTC. Here are two more companies currently trading in the Green Zone (our Buy signal) and experiencing strong momentum.

Mitsubishi Heavy Industries (MHVYF): Mitsubishi is one of the world’s largest engineering companies. Based in Tokyo, Japan, it operates in the aerospace and automotive industries. It manufacturers printers, missiles, tanks, air conditioners, and much more. It’s also one of the largest defense contractors on earth. When the economy is reopening, governments are flashing more stimulus money, and investors are looking for defensive trades in an expensive market, MHVYF stands out. The stock is in the Green Zone and shows uptrend momentum. It’s an attractive stock and a way to diversify away from a portfolio of just U.S.-based engineering and manufacturing firms like General Electric.

OTC Markets Group (OTCM): Finally, what better way to celebrate OTC stocks than to mention the financial market for them. OTC Group is a way to invest in the increasing efforts among investors to invest in companies trading OTC. Rather than betting on one individual company, you’re effectively investing in the entire lot. With OTC stocks gaining popularity and now trending on social media and chat boards like Reddit, OTC Group offers price and liquidity information on the available companies. The stock is sitting in the Green Zone and has upward momentum.

When you think of the stock market, don’t just think that the only places to invest are the New York Stock Exchange or the NASDAQ. There are many exchanges in the United States and thousands of stocks of different sizes and price levels that investors can consider.

The OTC market is one additional way to make money trading stocks. You simply need to know how to research and navigate their price and trend information properly. With TradeSmith Finance, we have you covered.

I’ll be back tomorrow to talk about some recent developments in the market. I’ve received many questions about why stocks are pulling back recently despite successful earnings reports. I’ll discuss this situation soon.

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